Private sector growth slows in the three months to January - CBI growth indicator

Momentum in UK private sector growth eased in the quarter to January, according to the latest CBI Growth Indicator.

The composite measure - based on 629 respondents across the distribution, manufacturing and service sectors - showed the balance of firms reporting a rise in output at +9%, compared with +19% in the three months to December 2017.

Growth slowed across the board although remained above the long-run average in most sectors. However, retail volumes declined in the quarter to January, continuing the trend of flat or falling volumes since October 2017.

Looking ahead, private sector growth is set to edge higher over the next three months, underpinned by a pick-up in service sector growth and solid growth in manufacturing and distribution, including a recovery in retail.

During this year and next, the CBI expect conditions to remain challenging for consumer-facing companies and retailers, with higher inflation and weak wage growth squeezing household budgets. Meanwhile, manufacturers should continue to benefit from the lower level of Sterling and the improving global economic environment. Please see the CBI’s December 2017 economic forecast for further details.

Commenting on the Growth Indicator, Anna Leach, CBI Head of Economic Intelligence, said:

“The growth indicator shows the UK economy grew at a moderate pace in 2017, with a slightly slower start to Q1 2018.

“Our surveys suggest that growth has slowed across the board, but it’s retailers that are once again bearing the brunt as inflationary pressures continue to squeeze consumer-facing businesses.

“A subdued economic outlook amidst continued Brexit uncertainty reinforces the need for urgent measures to boost productivity. The swift and effective implementation of the government’s recent Industrial Strategy and a pragmatic approach to Brexit that puts evidence before ideology remain the key priorities for business.”